Warm welcome to end of gas-fire ban

Lifting a 10-year ban on new gas-fired power stations should encourage more exploration and help steady electricity prices, according to oil and gas explorers.

There were earlier fears that the 10-year ban and the emissions trading scheme would make power prices rocket up to 50 per cent, after adjusting for inflation, in coming years.

Power companies came under fire from Reserve Bank governor Alan Bollard last week for lifting electricity prices by 6.6 per cent a year on average in the past three years twice the rate of inflation.

Yesterday, Energy and Resources Minister Gerry Brownlee introduced a bill to repeal the "thermal ban" brought under the Labour government.

Petroleum Exploration and Production Association executive officer John Pfahlert said the National Government's quick action to remove the ban should be welcomed by both the energy industry and electricity consumers.

"The issue with this ban was always the negative impact on oil and gas exploration and the downstream effects on security of supply and the affordability of electricity," he said.

The move also encouraged investment in exploration. Companies needed to explore for enough gas which was "crucial" to keep electricity prices down.

Exploration had been "seriously impacted by the misguided moratorium", he said.

"It's estimated our gas reserves will take us through the next 10 to 15 years. However, we need ongoing exploration to continue this vital resource for our future energy requirements," he said.

Recently, power industry experts said they had expected the new Government to drop the thermal ban, and called the move "essential and urgent". Under the ban, the total gas market was expected to fall from about 155 petajoules a year to 120PJ.

The end of the 10-year ban would encourage more exploration and could lead to big gas-fired power stations in the South Island if either of two big gas and oil prospects off the East Coast were found to be commercially viable, power sector expert Bryan Leyland said recently.

Some power companies have said they would not build gas-fired plants unless there was a big, new gas discovery. Most efforts now are going into geothermal power stations and wind power.

A report earlier this year suggested power prices could rise 40 to 50 per cent, adjusting for inflation, because of the Labour government's ban on gas-fired power stations and its target for 90 per cent renewable power.

Mr Brownlee pointed out that during the winter power shortage this year, New Zealand relied on gas and coal-fired power stations for about half of its power, when hydro lake levels were extremely low. "Thermal generation, particularly from gas-fired generation, is the insurance card underpinning the security of our electricity system," he said.

One power company said price rises in part reflected a 20 per cent increase in the cost of gas for power stations, while others said prices were rising to pay for more expensive sources of power such as wind turbines.